Pressure is mounting on the European Central Bank to cut interest rates on
Thursday after data showed that unemployment hit another record high in
March while inflation fell to a three-year low.

More than 19m people were unemployed in the eurozone in March, according to Eurostat, which said jobless rates had “risen markedly” since last year. The unemployment rate crept up to 12.1pc in March, from 12pc in February, while the wider European Union jobless rate held steady at 10.9pc.

The biggest rise in unemployment was in Greece, where the jobless rate jumped by almost a percentage point in one month to 27.2pc. Youth unemployment in the bailed-out nation crept closer to 60pc, with 59.1pc of 16 to 24-year-olds out of work in January, compared with 58.4pc in December.

Many economists now expect the ECB to cut its benchmark interest rate from an all-time-low of 0.75pc to 0.5pc to help ease funding conditions.

President Mario Draghi raised the spectre of a rate cut when he revealed that there had been an “extensive” discussion at last month’s policy meeting.

Marie Diron, senior economic adviser at Ernst & Young, said: “It now seems pretty certain that [the ECB] will lower interest rates and we hope that some additional non-conventional measures will be announced to address credit constraints for SMEs and in peripheral countries.”

Separate inflation figures on Tuesday also gave the ECB more room to cut rates. Eurozone inflation fell to 1.2pc in April, from 1.7pc in March, Eurostat said. The slowdown, driven by a sharp fall in energy prices, means inflation in the eurozone is now at its lowest level since February 2010, and well below the ECB’s 2pc target.

Meanwhile, Spain sank deeper into recession, official data confirmed yesterday, as economic output contracted in the first three months of 2013 for the seventh successive quarter. The National Statistics Institute said the eurozone’s fourth largest economy shrank by a further 0.5pc between January and March deepening a double-dip recession suffered since mid-2011.

Cyprus, the fourth eurozone nation to request a full-scale international rescue, approved the terms of its €10bn rescue package on Tuesday, which a narrow majority of 29 votes to 27.

Data on Tuesday also showed that German consumer confidence was forecast to rise to its highest level in almost six years in May. GfK's household confidence index was expected to climb to 6.2 points next month, from 6 points in April and a long-run average of zero.

Carsten Brzeski, an economist at ING, said the GfK numbers "confirm that the often written-off German consumers have become an important, though not strong, growth driver."